Interest Rate Swap Compression Match Engine

ABSTRACT

The disclosed embodiments relate to a system for trading using a central counterparty which allows market participants to minimize risk and/or transactional fees associated with a portfolio of bilateral positions without substantially altering a risk profile thereof. In particular, the disclosed embodiments allow a market participant holding a portfolio of heterogeneous bilateral positions, such as positions in interest rate swap (“IRS”) contracts, to net together similar but not identical positions within their portfolio, thereby reducing margin requirements and/or transaction fees, according to criteria specified by the market participant, and which may be different from criteria specified by other market participants, wherein the overall risk exposure desired by the market participant in entering into the positions remains substantially unchanged as does the desired overall risk exposure of the counterparty market participants to those positions.

RELATED APPLICATIONS

This application is a continuation under 37 CFR §1.53(b) of U.S. Pat.Application Ser. No. 13/428,808 filed Mar. 23, 2012 (Attorney Docket No.4672-12003AUS) now U.S. Pat. No. ______, the entire disclosure of whichis hereby incorporated by reference.

BACKGROUND

A financial instrument trading system, such as a futures exchange,referred to herein also as an “Exchange”, such as the Chicago MercantileExchange Inc. (CME), provides a contract market where financialinstruments, for example futures and options on futures, are traded.Futures is a term used to designate all contracts for the purchase orsale of financial instruments or physical commodities for futuredelivery or cash settlement on a commodity futures exchange. A futurescontract is a legally binding agreement to buy or sell a commodity at aspecified price at a predetermined future time. An option is the right,but not the obligation, to sell or buy the underlying instrument (inthis case, a futures contract) at a specified price within a specifiedtime. The commodity to be delivered in fulfillment of the contract, oralternatively the commodity for which the cash market price shalldetermine the final settlement price of the futures contract, is knownas the contract's underlying reference or “underlier.” The terms andconditions of each futures contract are standardized as to thespecification of the contract's underlying reference commodity, thequality of such commodity, quantity, delivery date, and means ofcontract settlement. Cash Settlement is a method of settling a futurescontract whereby the parties effect final settlement when the contractexpires by paying/receiving the loss/gain related to the contract incash, rather than by effecting physical sale and purchase of theunderlying reference commodity at a price determined by the futurescontract, price.

Typically, the Exchange provides for a centralized “clearing house”through which all trades made must be confirmed, matched, and settledeach day until offset or delivered. The clearing house is an adjunct tothe Exchange, and may be an operating division of the Exchange, which isresponsible for settling trading accounts, clearing trades, collectingand maintaining performance bond funds, regulating delivery, andreporting trading data. The essential role of the clearing house is tomitigate credit risk. Clearing is the procedure through which theClearing House becomes buyer to each seller of a futures contract, andseller to each buyer, also referred to as a novation, and assumesresponsibility for protecting buyers and sellers from financial loss dueto breach of contract, by assuring performance on each contract. Aclearing member is a firm qualified to clear trades through the ClearingHouse.

An interest rate futures contract, also referred to as an interest ratefuture, is a futures contract having an underlying instrument/asset thatpays interest, for which the parties to the contract are a buyer and aseller agreeing to the future delivery of the interest bearing asset, ora contractually specified substitute. Such a futures contract permits abuyer and seller to lock in the price, or in more general terms theinterest rate exposure, of the interest-bearing asset for a future date.

An interest rate swap (“IRS”) is a contractual agreement between twoparties, i.e., the counterparties, where one stream of future interestpayments is exchanged for another, e.g., a stream of fixed interest ratepayments in exchange for a stream of floating interest rate payments,based on a specified principal amount. An IRS may be used to limit ormanage exposure to fluctuations in interest rates. One common form ofIRS exchanges a stream of floating interest rate payments on the basisof the 3-month London interbank offered rate for a stream of fixed-ratepayments on the basis of the swap's fixed interest rate. Another commonform of IRS, knows as an overnight index swap, exchanges at itstermination a floating rate payment determined by daily compounding of asequence of floating interest rates on the basis of an overnightinterest rate reference (e.g., the US daily effective federal fundsrate, or the European Overnight Index Average (EONIA)) over the life ofthe swap, for a fixed rate payment on the basis of daily compounding ofthe overnight index swap's fixed interest rate over the life of theswap.

An interest rate swap futures contract is one in which the underlyinginstrument is an interest rate swap. As such, an interest rate swapfutures contract permits “synthetic” exposure to the underlying interestrate swap, i.e., without entailing actual ownership of the underlyingIRS.

In a typical futures trading environment, the standardization of futurescontracts and the nature of the central counterparty based tradingsystem allows an Exchange, or market participant thereof, to nettogether offsetting positions in the same contract for the purpose ofreducing the margin requirement to reflect the reduced risk of loss ofsuch positions and/or to outright consolidate positions to reduce thesize of the portfolio and/or reduce transaction fees therefore. As theExchange, being a central counterparty to all transactions, ensures thateach counter-party is not at risk of loss due to the default of theother party, such netting and consolidation by one market participantdoes not affect the positions and risk undertaken by anotherparticipant.

In the case of IRS contracts, however, the variability in thecharacteristics of positions which may exist in any given portfolio,such as the maturity date, coupon, etc. makes it difficult to identifysuitable positions for netting though, for example, such positions,though not identical, may exist which are similar enough as to representa reduced risk of loss meriting a reduction in the margin requirement.Further complicating this process is the bilateral nature of an IRScontract where a particular position of one party is coupled with acounter position of a counter-party thereto. Further, as describedabove, positions in IRS contracts, and in particular, variouscombinations of positions therein, are typically undertaken to serveparticular economic purposes, such as to achieve a particular riskexposure or risk profile, which may be unique to that marketparticipant. Accordingly, IRS contract positions within a particularportfolio may not be consolidated without necessarily affecting not onlythe economic purpose intended by the market participant holding thatportfolio but also the economic purposes which may be different, of anycounter party market participants thereto. Accordingly, opportunities toreduce margin requirements and/or transactional fees for IRS contractportfolios are limited.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 depicts an illustrative computer network system that may be usedto implement aspects of the disclosed embodiments.

FIG. 2 a block diagram of an exemplary implementation of the system ofFIG. 1 for netting a plurality of offsettable positions of a pluralityof positions within each of a plurality of portfolios according to thedisclosed embodiments.

FIG. 3 depicts a flow chart showing operation of the system of FIGS. 1and 2.

FIG. 4 shows an illustrative embodiment of a general computer system foruse with the system of FIGS. 1 and 2.

FIGS. 5A-5C show screen shots of an exemplary web based interface foruse with the disclosed embodiments.

DETAILED DESCRIPTION

The disclosed embodiments relate to a system for trading using a centralcounterparty which allows market participants to minimize risk and/ortransactional fees associated with a portfolio of bilateral positionswithout substantially altering a risk profile thereof. In particular,the disclosed embodiments allow a market participant holding a portfolioof heterogeneous bilateral positions, such as positions in interest rateswap (“IRS”) contracts, to net together similar but not identicalpositions within their portfolio, thereby reducing margin requirementsand/or transaction fees, according to criteria specified by the marketparticipant, and which may be different from criteria specified by othermarket participants, wherein the overall risk exposure desired by themarket participant in entering into the positions remains substantiallyunchanged as does the desired overall risk exposure of the counterpartymarket participants to those positions.

As discussed above, an IRS is a contractual agreement between twoparties, i.e., the counterparties, where one stream of future interestpayments is exchanged for another, e.g., a stream of fixed interest ratepayments in exchange for a stream of floating interest rate payments,based on a specified principal amount. An IRS may be used to limit ormanage exposure to fluctuations in interest rates. One common form ofIRS exchanges a stream of floating interest rate payments on the basisof the 3-month London interbank offered rate for a stream of fixed-ratepayments on the basis of the swap's fixed interest rate. Another commonform of IRS, knows as an overnight index swap, exchanges at itstermination a floating rate payment determined by daily compounding of asequence of floating interest rates on the basis of an overnightinterest rate reference (e.g., the US daily effective federal fundsrate, or the European Overnight Index Average (EONIA)) over the life ofthe swap, for a fixed rate payment on the basis of daily compounding ofthe overnight index swap's fixed interest rate over the life of theswap.

Generally, the disclosed embodiments relate to a match engine which netstogether offsetting positions of similar but not identical positionsaccording of counterparties therein which may have different criteria bywhich the positions of their portfolios are to be netted together. Thedisclosed embodiments be used to provide a comprehensive service, suchas by the clearing house of an Exchange, that allows users to reduce theoverall size and number of outstanding contacts in an IRS portfoliowithout changing the risk profiles of the portfolio thus potentiallyreducing initial margin requirements, maintenance margin requirementsand transactional fees associated therewith. This results in a smallernumber of trades with lower notional amounts that carries the same riskprofile as the initial portfolio. Further, this system reduces thecomputational burden on the computational resources of the Exchange byreducing transactional, data processing and storage requirements.

Due to the nature of interest rate swap trading, a given portfolio mayinclude a large number of individually unique positions, also referredto as line items. As these positions may be similar, but not identical,a new function for clearinghouses to net similar but not identical lineitems is needed. As a futures exchange, for example, CME has robustcapability to allow a trader to initiate a position (buy, sell) orunwind the same a position (sell, buy). However, CME has no mechanism togroup positions by similar characteristics and then eliminateoverlapping line items. The capability to net non-identical line itemsis referred to herein as compression.

When attempting to net similar but not identical positions, it may benecessary to define the extent to which positions may be consideredsimilar or dissimilar. As was explained above, market participants mayundertake positions in IRS contracts for unique economic reasons and,accordingly, in order to ensure that their portfolio continues to servethe desired economic purpose, may have unique criteria for whatpositions may be considered similar, and therefore available for nettingor consolidation, as which are not. Some market participants mayundertake positions for which they do not want netting or consolidationto occur at all.

Compression generally reduces the notional value of economicallyoffsetting positions without having to necessarily unwind exactly thesame position that was initiated. Previous systems have employedcompression generally in dealer-to-dealer trading. Given the homogeneityof the user base in existing systems, previously there was little needfor systems to accommodate unique compression criteria. However, as theuser base for cleared IRS grows, so too do the differences incompression criteria, and the need to pair large numbers of potentiallydisparate users.

Contrary thereto, for example, in CME Group's case where interest rateswaps are cleared by a central counter party for customers, the group isheterogeneous, different firms may be using different accounting forswaps within the same portfolio, and there are many customers from whomthe exchange needs to collect this information simultaneously.

Further, as was described, positions in one portfolio cannot necessarilybe netted or consolidated without affecting counter-positions held inthe portfolios of the counter-party market participants thereto whichmay have different criteria for determining nettable/consolidatablepositions according to their unique economic purpose. In addition, asthe Exchange implements a central counterparty, each market participantmay be prohibited from being privy to the portfolios and/or criteria ofother market participants so as to preserve the anonymity thereof.

Accordingly, the disclosed embodiments implement a centralizedcompression so as to anonymously resolve nettable or consolidatablepositions across portfolios according to the criteria specified by eachmarket participant. In this manner, portfolio margin requirements and/ortransactional fees associated therewith may be reduced withoutcompromising the economic purpose desired by each trader for theirportfolio. The resolution of compressible positions may further beperformed in real time with respect to the affected portfolios, i.e.with respect to the contents of those portfolios as of the time ofapplication. The compression process may be simulated to show “what if”results according to ad hoc specified compression criteria or actuallyimplemented so as to modify the portfolio. Further, market participantscan specify default, or resting, compression criteria which may be usedby the disclosed embodiments to implement compression at a later time oron a periodic basis without further participant intervention, andwherein the results thereof are subsequently reported back to theassociated market participants. The resting compression criteria may bedifferent or otherwise separately specified from the ad hoc compressioncriteria.

In one embodiment, a web based/Internet accessible interface is providedto a centrally managed system which implements the disclosedembodiments, such as hosted by the Exchange, where market participantsmay view their current portfolio and specify their compression criteria.Alternatively, the disclosed embodiments may implemented in adistributed fashion where a portion of the functionality may beimplemented on a computer system of the market participant. For example,a client application may be provided to the market participant, orotherwise integrated with the trading interface utilized thereby, whichdisplays the portfolio, receives the compression criteria and otherwiseenables the functionality described herein. The client application maythen interface or otherwise interact with a back-end system or databaseof the Exchange to submit compression criteria, execute and view theresults of simulated or actual compressions against the other marketparticipant portfolios or otherwise initiate transactions therewith. Itwill be appreciated that the disclosed embodiments may be implemented indifferent ways which provide the disclosed functionality and preservethe security and anonymity of the market participants.

In one embodiment, a web interface and match engine is provided formarket participants to access their portfolio to run compressionscenarios. Market participants can see their whole cleared portfolio,exclude certain line items from the compression cycle, and performwhat-if scenario analysis. The market participants can also see theircurrent margin requirements, as well as how it would change depending oncompression criteria.

As described above, the compression criteria, which may include forexample, the maturity difference of offsetting swaps as well as thecoupon difference, may be the most critical decision influencingpotential margin reduction. For example, a customer may specify thatthey want swaps to net with maturity differences no more than 7-daysdifference, and 25 basis point difference in coupon, which would berelatively narrow criteria. In order for two trades to be netted thatfall within those criteria, one position long and the other short, thecounterpart to the trade would have to specify criteria that is at leastas liberal, for example 10-days and 30 basis points different. Othercompression criteria may include, but are not limited to, DV01 (ameasure of risk and stands for the dollar value of a one basis pointchange change in yield of the reference IRS) remainder and floating ratereset maturity difference. For example, some swaps determine thefloating rate reset dates by working backwards from the maturity, andsome work forward from the swap effective (start) date. It will beappreciated that there may be other criteria which may be used with thedisclosed embodiments, such as criteria based on other characteristicsof IRS contracts and relationships therebetween, and all such criteria,now available or later developed, are contemplated herein.

The disclosed embodiment may further provide a compression match enginewhich then aggregates all of the customer inputs, such as in a centraldatabase, searches for suitably overlapping or otherwise correlatedcompression criteria, and then applies, or simulates the application of,those criteria to the portfolios. It will be appreciated that, as thecompression criteria may include different criteria, each of which maybe specified as a range within which compression may be acceptable tothe market participant, there may multiple methods for identifyingoffsetting positions which may yield results of varying optimality. Inone embodiment, the optimal compression is one which results in thelargest reduction in the margin requirement of the portfolio within theboundaries of the specified compression criteria. Accordingly, based onthe compression criteria for each counterparty, the engine may begin bycharacterizing each portfolio in terms of the number and size of eachline position, the distribution and/or skew of the distribution. Basedthereon, the engine may process the positions in each portfolio such asby beginning with biggest to smallest positions, smallest to biggest,increasing maturity, decreasing maturity, average size, etc. In oneembodiment, after finding the optimal approach, as defined as the onethat results in the largest drop in initial margin, the engine may storedata representative of the portfolio characteristics and the searchmethod which yielded the optimal results. In future applications, theportfolio to be compressed may then be compared with previouslyprocessed portfolios wherein the optimal compression method previousdetermined for a similar portfolio is tried first for the currentportfolio. In this manner, the system may learn over time whichcompression methods are most likely to achieve optimal results forparticular portfolios, further reducing the amount of speculativeprocessing required to reach an optimal result and improving theefficiency thereof. Herein, this may be referred to as “genetic”processing.

While the disclosed embodiments may be discussed in relation to IRScontracts, it will be appreciated that the disclosed embodiments may beapplicable to other bilateral contracts, equity, options or futurestrading system or market now available or later developed.

It will be appreciated that the plurality of entities utilizing thedisclosed embodiments, e.g. the market participants, may be referred toby other nomenclature reflecting the role that the particular entity isperforming with respect to the disclosed embodiments and that a givenentity may perform more than one role depending upon the implementationand the nature of the particular transaction being undertaken, as wellas the entity's contractual and/or legal relationship with anothermarket participant and/or the exchange. An exemplary trading networkenvironment for implementing trading systems and methods is shown inFIG. 1. An exchange computer system 100 receives orders and transmitsmarket data related to orders and trades to users, such as via wide areanetwork 126 and/or local area network 124 and computer devices 114, 116,118, 120 and 122, as will be described below, coupled with the exchangecomputer system 100.

Herein, the phrase “coupled with” is defined to mean directly connectedto or indirectly connected through one or more intermediate components.Such intermediate components may include both hardware and softwarebased components. Further, to clarify the use in the pending claims andto hereby provide notice to the public, the phrases “at least one of<A>, <B>, . . . and <N>” or “at least one of <A>, <B>, . . . <N>, orcombinations thereof” are defined by the Applicant in the broadestsense, superseding any other implied definitions herebefore orhereinafter unless expressly asserted by the Applicant to the contrary,to mean one or more elements selected from the group comprising A, B, .. . and N, that is to say, any combination of one or more of theelements A, B, . . . or N including any one element alone or incombination with one or more of the other elements which may alsoinclude, in combination, additional elements not listed.

The exchange computer system 100 may be implemented with one or moremainframe, desktop or other computers, such as the computer 400described below with respect to FIG. 4. A user database 102 may beprovided which includes information identifying traders and other usersof exchange computer system 100, such as account numbers or identifiers,user names and passwords. An account data module 104 may be providedwhich may process account information that may be used during trades. Amatch engine module 106 may be included to match bid and offer pricesand may be implemented with software that executes one or morealgorithms for matching bids and offers. A trade database 108 may beincluded to store information identifying trades and descriptions oftrades. In particular, a trade database may store informationidentifying the time that a trade took place and the contract price. Anorder book module 110 may be included to compute or otherwise determinecurrent bid and offer prices. A market data module 112 may be includedto collect market data and prepare the data for transmission to users. Arisk management module 134 may be included to compute and determine auser's risk utilization in relation to the user's defined riskthresholds. An order processing module 136 may be included to decomposedelta based and bulk order types for processing by the order book module110 and/or match engine module 106. A volume control module 140 may beincluded to, among other things, control the rate of acceptance of massquote messages.

The trading network environment shown in FIG. 1 includes exemplarycomputer devices 114, 116, 118, 120 and 122 which depict differentexemplary methods or media by which a computer device may be coupledwith the exchange computer system 100 or by which a user maycommunicate, e.g. send and receive, trade or other informationtherewith. It will be appreciated that the types of computer devicesdeployed by traders and the methods and media by which they communicatewith the exchange computer system 100 is implementation dependent andmay vary and that not all of the depicted computer devices and/ormeans/media of communication may be used and that other computer devicesand/or means/media of communications, now available or later developedmay be used. Each computer device, which may comprise a computer 400described in more detail below with respect to FIG. 4, may include acentral processor that controls the overall operation of the computerand a system bus that connects the central processor to one or moreconventional components, such as a network card or modem. Each computerdevice may also include a variety of interface units and drives forreading and writing data or files and communicating with other computerdevices and with the exchange computer system 100. Depending on the typeof computer device, a user can interact with the computer with akeyboard, pointing device, microphone, pen device or other input devicenow available or later developed.

An exemplary computer device 114 is shown directly connected to exchangecomputer system 100, such as via a T1 line, a common local area network(LAN) or other wired and/or wireless medium for connecting computerdevices, such as the network 420 shown in FIG. 4 and described belowwith respect thereto. The exemplary computer device 114 is further shownconnected to a radio 132. The user of radio 132, which may include acellular telephone, smart phone, or other wireless proprietary and/ornon-proprietary device, may be a trader or exchange employee. The radiouser may transmit orders or other information to the exemplary computerdevice 114 or a user thereof. The user of the exemplary computer device114, or the exemplary computer device 114 alone and/or autonomously, maythen transmit the trade or other information to the exchange computersystem 100.

Exemplary computer devices 116 and 118 are coupled with a local areanetwork (“LAN”) 124 which may be configured in one or more of thewell-known LAN topologies, e.g. star, daisy chain, etc., and may use avariety of different protocols, such as Ethernet, TCP/IP, etc. Theexemplary computer devices 116 and 118 may communicate with each otherand with other computer and other devices which are coupled with the LAN124. Computer and other devices may be coupled with the LAN 124 viatwisted pair wires, coaxial cable, fiber optics or other wired orwireless media. As shown in FIG. 1, an exemplary wireless personaldigital assistant device (“PDA”) 122, such as a mobile telephone, tabletbased compute device, or other wireless device, may communicate with theLAN 124 and/or the Internet 126 via radio waves, such as via WiFi,Bluetooth and/or a cellular telephone based data communicationsprotocol. PDA 122 may also communicate with exchange computer system 100via a conventional wireless hub 128.

FIG. 1 also shows the LAN 124 coupled with a wide area network (“WAN”)126 which may be comprised of one or more public or private wired orwireless networks. In one embodiment, the WAN 126 includes the Internet126. The LAN 124 may include a router to connect LAN 124 to the Internet126. Exemplary computer device 120 is shown coupled directly to theInternet 126, such as via a modem, DSL line, satellite dish or any otherdevice for connecting a computer device to the Internet 126 via aservice provider therefore as is known. LAN 124 and/or WAN 126 may bethe same as the network 420 shown in FIG. 4 and described below withrespect thereto.

As was described above, the users of the exchange computer system 100may include one or more market makers 130 which may maintain a market byproviding constant bid and offer prices for a derivative or security tothe exchange computer system 100, such as via one of the exemplarycomputer devices depicted. The exchange computer system 100 may alsoexchange information with other trade engines, such as trade engine 138.One skilled in the art will appreciate that numerous additionalcomputers and systems may be coupled to exchange computer system 100.Such computers and systems may include clearing, regulatory and feesystems.

The operations of computer devices and systems shown in FIG. 1 may becontrolled by computer-executable instructions stored on anon-transitory computer-readable medium. For example, the exemplarycomputer device 116 may include computer-executable instructions forreceiving order information from a user and transmitting that orderinformation to exchange computer system 100. In another example, theexemplary computer device 118 may include computer-executableinstructions for receiving market data from exchange computer system 100and displaying that information to a user.

Of course, numerous additional servers, computers, handheld devices,personal digital assistants, telephones and other devices may also beconnected to exchange computer system 100. Moreover, one skilled in theart will appreciate that the topology shown in FIG. 1 is merely anexample and that the components shown in FIG. 1 may include othercomponents not shown and be connected by numerous alternativetopologies.

As shown in FIG. 1, the Exchange computer system 100 further includes arisk management module 134 which may implement the disclosed mechanismsas will be described with reference to FIG. 2. It will be appreciatedthe disclosed embodiments may be implemented separate module or aseparate computer system coupled with the Exchange computer system 100so as to have access to the requisite portfolio data. As describedabove, the disclosed embodiments may be implemented as a centrallyaccessible system or as a distributed system where some of the disclosedfunctions are performed by the computer systems of the marketparticipants.

FIG. 2 depicts a block diagram of a risk management module 140 accordingto one embodiment, which in an exemplary implementation, is implementedas part of the exchange computer system 100 described above. As usedherein, an exchange 100 includes a place or system that receives and/orexecutes orders.

In particular, FIG. 2 shows a system 200 for netting a plurality ofoffsettable positions of a plurality of positions within each of aplurality of portfolios, each of the plurality of portfolios beingassociated with a market participant wherein the plurality of positionsof one of the plurality of portfolios may be different from theplurality of positions of at least one other of the plurality ofportfolios. The netting may reduce a margin requirement, reflective of areduction of risk, and/or transactional fees, reflective of aconsolidation of positions, associated with one or more of the pluralityof portfolios. The system 200 does not reveal the identities of themarket participants to each other. In one embodiment, at least one ofthe plurality of positions may include a position in an interest rateswap contract. Further,

The system 200 includes a processor 202 and a memory 204 coupledtherewith which may be implemented a processor 402 and memory 404 asdescribed below with respect to FIG. 4. The system 200 further includesfirst logic 206 stored in the memory 204 and executable by the processor202 to cause the processor 202 to receive, such as via a network 214coupled therewith, from each market participant, criteria datarepresentative of a plurality of conditions by which the associatedmarket participant considers any of the plurality of positions of theirassociated portfolio as being an offsettable position with respect toanother of the plurality of positions of their associated portfolio,wherein the criteria data received from one market participant isdifferent from the criteria data received from at least one other marketparticipant.

In one embodiment, wherein each position of the plurality of positionsof each portfolio is characterized by a maturity, a coupon, and ameasure of risk, the plurality of conditions may include a maximumdifference between the maturity of at least two of the plurality ofpositions within the associated portfolio, a minimum difference betweenthe maturity of at least two of the plurality of positions within theassociated portfolio, a maximum difference between the coupons of atleast two of the plurality of positions within the associated portfolio,a minimum difference between the coupons of at least two of theplurality of positions within the associated portfolio, a maximumdifference between the measure of risk of at least two of the pluralityof positions within the associated portfolio, a minimum differencebetween the measure of risk of at least two of the plurality ofpositions within the associated portfolio, or combinations thereof.Alternatively, or in addition thereto, the plurality of conditions mayinclude an exclusion of at least one position of the plurality ofpositions from being considered an offsettable position.

The system 200 further includes second logic 208 stored in the memory204 and executable by the processor 202 to cause the processor 202 toevaluate each of the received criteria data to determine whether, for afirst portfolio of the plurality of portfolios of a first marketparticipant of the plurality of market participants from which thecriteria data was received, at least first and second positions includedin the first portfolio and considered offsettable under the plurality ofconditions of the criteria data received from the first marketparticipant would further be considered offsettable positions under theplurality of conditions of another criteria data received from a secondmarket participant associated with a second portfolio of the pluralityof portfolios which includes at least a third position counter to thefirst position and a fourth position counter to the second position andconsidered offsettable under the plurality of conditions of the criteriadata received from the second market participant and wherein the thirdand fourth positions are further considered offsettable positions underthe plurality of conditions of the criteria data received from the firstmarket participant.

In one embodiment, the netting is simulated. Alternatively, thepositions of the portfolios, e.g. the first and second portfolios, maybe modified as a result of the netting. In one embodiment, a marketparticipant may choose whether to simulate netting or actually apply theresults thereof to their portfolio.

In one embodiment, the system 200 may further include tenth logic 212stored in the memory 204 and executable by the processor 202 to causethe processor 202 to periodically, e.g. automatically on a periodicbasis, execute the second 208 and third logic 210 and report the resultsto at least the first and second market participants. The periodicexecution may be based on the criteria data previously provided by themarket participants.

In one embodiment, the system 200 may further include eleventh logic 212stored in the memory 204 and executable by the processor 202 to causethe processor 202 to execute the second 208 and third logic 210 uponrequest of the first market participant. For example, a marketparticipant may access the system 200 to perform simulations wherebythey alter the criteria data and request execution based thereon to testdifferent criteria data.

In one embodiment, the system 200 may further include twelfth logic 212stored in the memory 204 and executable by the processor 202 to causethe processor 202 to provide a graphic user interface via which thecriteria data is received and results of the netting are presented. Inone implementation, the graphic user interface comprises a web basedinterface comprising one or more web page. FIGS. 5A-5C show screen shotsof an exemplary web based interface for use with the disclosedembodiments.

The system 200 further includes third logic 210 stored in the memory 204and executable by the processor 202 to cause the processor 202 to netthe first position with the second position and the third position withthe fourth position, when the first and second positions and the thirdand fourth positions are determined to be considered offsettablepositions under the plurality of conditions of both the criteria datareceived from the first market participant and the criteria datareceived from the second market participant.

In one embodiment, wherein the first position may be considered furtheroffsettable against a fifth position of the first portfolio under theplurality of conditions of both the criteria data received from thefirst and second market participants, the fifth position being counterto a sixth position of the second portfolio considered to be offsettableagainst the third position under the plurality of conditions of both thecriteria data received from the first and second market participants,the system 200 may further include: fourth logic 212 stored in thememory 204 and executable by the processor 202 to cause the processor202 to determine whether netting the first position with the secondposition is more optimal than netting the first position with the fifthposition; and wherein the third logic 210 is further executable by theprocessor 202 to cause the processor 202 to net the first position withthe second or fifth position based thereon.

Further, the fourth logic 212 may be further executable by the processor202 to cause the processor 202 to compute a first margin requirement forthe first portfolio based on the netting of the first and secondpositions and compute a second margin requirement for the firstportfolio based on the netting of the first and fifth positions, whereinthe netting of the first and second positions is determined to be moreoptimal if the first margin requirement is less than the second marginrequirement.

Alternatively, or in addition thereto, the fourth logic 212 may befurther executable by the processor 202 to cause the processor 202 toevaluate the first position in different orderings against the secondand fifth positions, the different orderings being based on a size ofthe second and fifth positions or maturity date of the second and fifthpositions. In one embodiment, the system 200 may further include fifthlogic 212 stored in the memory 204 and executable by the processor 202to cause the processor 202 to, prior to the evaluation of the firstposition in the different orderings, characterize each of the first andsecond portfolios in terms of a number and size of each of the pluralityof positions thereof and further, the distribution and skew thereof.

In one embodiment, the system 200 may further include: sixth logic 212stored in the memory 204 and executable by the processor 202 to causethe processor 202 to store in the memory 204, data representative of thefirst portfolio along with data indicative of which ordering of thedifferent orderings resulted in the more optimal netting; seventh logic212 stored in the memory 204 and executable by the processor 202 tocause the processor 202 to receive a third portfolio; eighth logic 212stored in the memory 204 and executable by the processor 202 to causethe processor 202 to access the memory 204 to determine if the thirdportfolio is similar to the first portfolio based on the stored datarepresentative thereof; and ninth logic 212 stored in the memory 204 andexecutable by the processor 202 to cause the processor 202 to evaluateoffsettable positions of the third portfolio in the ordering indicatedby the data indicative of the order which resulted in the more optimalnetting for the first portfolio prior to other of the differentorderings, when it is determined that the first and third portfolios aresimilar.

FIG. 3 depicts a flow chart showing operation of the system 200 of FIG.2. In particular FIG. 3 shows a computer implemented method for nettinga plurality of offsettable positions of a plurality of positions withineach of a plurality of portfolios, each of the plurality of portfoliosbeing associated with a market participant. The operation of the system200 includes: receiving, by a processor from each market participant,criteria data representative of a plurality of conditions by which theassociated market participant considers any of the plurality ofpositions of their associated portfolio as being an offsettable positionwith respect to another of the plurality of positions of theirassociated portfolio, wherein the criteria data received from one marketparticipant is different from the criteria data received from at leastone other market participant [block 302]; evaluating, by the processor,each of the received criteria data to determine whether, for a firstportfolio of the plurality of portfolios of a first market participantof the plurality of market participants from which the criteria data wasreceived, at least first and second positions included in the firstportfolio and considered offsettable under the plurality of conditionsof the criteria data received from the first market participant wouldfurther be considered offsettable positions under the plurality ofconditions of another criteria data received from a second marketparticipant associated with a second portfolio of the plurality ofportfolios which includes at least a third position counter to the firstposition and a fourth position counter to the second position andconsidered offsettable under the plurality of conditions of the criteriadata received from the second market participant and wherein the thirdand fourth positions are further considered offsettable positions underthe plurality of conditions of the criteria data received from the firstmarket participant [block 304]; and netting, by the processor, the firstposition with the second position and the third position with the fourthposition, when the first and second positions and the third and fourthpositions are determined to be considered offsettable positions underthe plurality of conditions of both the criteria data received from thefirst market participant and the criteria data received from the secondmarket participant [block 306].

At least one of the plurality of positions may include a position in aninterest rate swap contract. The plurality of positions of one of theplurality of portfolios may be different from the plurality of positionsof at least one other of the plurality of portfolios. In one embodiment,wherein each position of the plurality of positions of each portfolio ischaracterized by a maturity, a coupon, and a measure of risk, theplurality of conditions may include a maximum difference between thematurity of at least two of the plurality of positions within theassociated portfolio, a minimum difference between the maturity of atleast two of the plurality of positions within the associated portfolio,a maximum difference between the coupons of at least two of theplurality of positions within the associated portfolio, a minimumdifference between the coupons of at least two of the plurality ofpositions within the associated portfolio, a maximum difference betweenthe measure of risk of at least two of the plurality of positions withinthe associated portfolio, a minimum difference between the measure ofrisk of at least two of the plurality of positions within the associatedportfolio, or combinations thereof. It will be appreciated that theremay be other conditions as well. For example, the plurality ofconditions may include an exclusion of at least one position of theplurality of positions from being considered an offsettable position.

In one embodiment, the netting is simulated. Alternatively, or inaddition thereto, the positions in the first and second portfolios aremodified according to the netting. The netting may result in at least areduction of a margin requirement of the first portfolio.

In one embodiment, the evaluating and netting are periodicallyperformed, such as on a schedule or cycle and the results are reportedto at least the first and second market participants. Alternatively, orin addition thereto, the evaluating and netting may be performed uponrequest of the first market participant [block 320].

In one embodiment, a graphic user interface may be provided, such as aweb based interface, via which the criteria data is received and resultsof the netting are presented [block 322].

In one embodiment wherein the first position may be considered furtheroffsettable against a fifth position of the first portfolio under theplurality of conditions of both the criteria data received from thefirst and second market participants, the fifth position being counterto a sixth position of the second portfolio considered to be offsettableagainst the third position under the plurality of conditions of both thecriteria data received from the first and second market participants,the operation of the system 200 may further include: determining, by theprocessor, whether netting the first position with the second positionis more optimal than netting the first position with the fifth position[block 308]; and netting, by the processor, the first position with thesecond or fifth position based thereon [block 306].

In one embodiment, the determining may further include computing, by theprocessor, a first margin requirement for the first portfolio based onthe netting of the first and second positions and computing, by theprocessor, a second margin requirement for the first portfolio based onthe netting of the first and fifth positions, wherein the netting of thefirst and second positions is determined to be more optimal if the firstmargin requirement is less than the second margin requirement [block310].

In one embodiment, the determining may further include evaluating, bythe processor, the first position in different orderings against thesecond and fifth positions, the different orderings being based on asize of the second and fifth positions or maturity date of the secondand fifth positions [block 312].

In one embodiment, prior to the evaluating of the first position in thedifferent orderings, the operation of the system 200 may further includecharacterizing each of the first and second portfolios in terms of anumber and size of each of the plurality of positions thereof andfurther, the distribution and skew thereof [block 314].

In on embodiment, the operation of the system 200 further includes:storing, by the processor in a memory coupled therewith, datarepresentative of the first portfolio along with data indicative ofwhich ordering of the different orderings resulted in the more optimalnetting [block 316]; receiving, by the processor, a third portfolio[block 302]; accessing, by the processor, the memory to determine if thethird portfolio is similar to the first portfolio based on the storeddata representative thereof [block 318]; and evaluating, by theprocessor, offsettable positions of the third portfolio in the orderingindicated by the data indicative of the order which resulted in the moreoptimal netting for the first portfolio prior to other of the differentorderings, when it is determined that the first and third portfolios aresimilar [block 312].

One skilled in the art will appreciate that one or more modulesdescribed herein may be implemented using, among other things, atangible computer-readable medium comprising computer-executableinstructions (e.g., executable software code). Alternatively, modulesmay be implemented as software code, firmware code, hardware, and/or acombination of the aforementioned. For example the modules may beembodied as part of an exchange 100 for financial instruments.

Referring to FIG. 4, an illustrative embodiment of a general computersystem 400 is shown. The computer system 400 can include a set ofinstructions that can be executed to cause the computer system 400 toperform any one or more of the methods or computer based functionsdisclosed herein. The computer system 400 may operate as a standalonedevice or may be connected, e.g., using a network, to other computersystems or peripheral devices. Any of the components discussed above,such as the processor 202, may be a computer system 400 or a componentin the computer system 400. The computer system 400 may implement amatch engine, margin processing, payment or clearing function on behalfof an exchange, such as the Chicago Mercantile Exchange, of which thedisclosed embodiments are a component thereof.

In a networked deployment, the computer system 400 may operate in thecapacity of a server or as a client user computer in a client-serveruser network environment, or as a peer computer system in a peer-to-peer(or distributed) network environment. The computer system 400 can alsobe implemented as or incorporated into various devices, such as apersonal computer (PC), a tablet PC, a set-top box (STB), a personaldigital assistant (PDA), a mobile device, a palmtop computer, a laptopcomputer, a desktop computer, a communications device, a wirelesstelephone, a land-line telephone, a control system, a camera, a scanner,a facsimile machine, a printer, a pager, a personal trusted device, aweb appliance, a network router, switch or bridge, or any other machinecapable of executing a set of instructions (sequential or otherwise)that specify actions to be taken by that machine In a particularembodiment, the computer system 400 can be implemented using electronicdevices that provide voice, video or data communication. Further, whilea single computer system 400 is illustrated, the term “system” shallalso be taken to include any collection of systems or sub-systems thatindividually or jointly execute a set, or multiple sets, of instructionsto perform one or more computer functions.

As illustrated in FIG. 4, the computer system 400 may include aprocessor 402, e.g., a central processing unit (CPU), a graphicsprocessing unit (GPU), or both. The processor 402 may be a component ina variety of systems. For example, the processor 402 may be part of astandard personal computer or a workstation. The processor 402 may beone or more general processors, digital signal processors, applicationspecific integrated circuits, field programmable gate arrays, servers,networks, digital circuits, analog circuits, combinations thereof, orother now known or later developed devices for analyzing and processingdata. The processor 402 may implement a software program, such as codegenerated manually (i.e., programmed).

The computer system 400 may include a memory 404 that can communicatevia a bus 408. The memory 404 may be a main memory, a static memory, ora dynamic memory. The memory 404 may include, but is not limited tocomputer readable storage media such as various types of volatile andnon-volatile storage media, including but not limited to random accessmemory, read-only memory, programmable read-only memory, electricallyprogrammable read-only memory, electrically erasable read-only memory,flash memory, magnetic tape or disk, optical media and the like. In oneembodiment, the memory 404 includes a cache or random access memory forthe processor 402. In alternative embodiments, the memory 404 isseparate from the processor 402, such as a cache memory of a processor,the system memory, or other memory. The memory 404 may be an externalstorage device or database for storing data. Examples include a harddrive, compact disc (“CD”), digital video disc (“DVD”), memory card,memory stick, floppy disc, universal serial bus (“USB”) memory device,or any other device operative to store data. The memory 404 is operableto store instructions executable by the processor 402. The functions,acts or tasks illustrated in the figures or described herein may beperformed by the programmed processor 402 executing the instructions 412stored in the memory 404. The functions, acts or tasks are independentof the particular type of instructions set, storage media, processor orprocessing strategy and may be performed by software, hardware,integrated circuits, firm-ware, micro-code and the like, operating aloneor in combination. Likewise, processing strategies may includemultiprocessing, multitasking, parallel processing and the like.

As shown, the computer system 400 may further include a display unit414, such as a liquid crystal display (LCD), an organic light emittingdiode (OLED), a flat panel display, a solid state display, a cathode raytube (CRT), a projector, a printer or other now known or later developeddisplay device for outputting determined information. The display 414may act as an interface for the user to see the functioning of theprocessor 402, or specifically as an interface with the software storedin the memory 404 or in the drive unit 406.

Additionally, the computer system 400 may include an input device 416configured to allow a user to interact with any of the components ofsystem 400. The input device 416 may be a number pad, a keyboard, or acursor control device, such as a mouse, or a joystick, touch screendisplay, remote control or any other device operative to interact withthe system 400.

In a particular embodiment, as depicted in FIG. 4, the computer system400 may also include a disk or optical drive unit 406. The disk driveunit 406 may include a computer-readable medium 410 in which one or moresets of instructions 412, e.g. software, can be embedded. Further, theinstructions 412 may embody one or more of the methods or logic asdescribed herein. In a particular embodiment, the instructions 412 mayreside completely, or at least partially, within the memory 404 and/orwithin the processor 402 during execution by the computer system 400.The memory 404 and the processor 402 also may include computer-readablemedia as discussed above.

The present disclosure contemplates a computer-readable medium thatincludes instructions 412 or receives and executes instructions 412responsive to a propagated signal, so that a device connected to anetwork 420 can communicate voice, video, audio, images or any otherdata over the network 420. Further, the instructions 412 may betransmitted or received over the network 420 via a communicationinterface 418. The communication interface 418 may be a part of theprocessor 402 or may be a separate component. The communicationinterface 418 may be created in software or may be a physical connectionin hardware. The communication interface 418 is configured to connectwith a network 420, external media, the display 414, or any othercomponents in system 400, or combinations thereof. The connection withthe network 420 may be a physical connection, such as a wired Ethernetconnection or may be established wirelessly as discussed below.Likewise, the additional connections with other components of the system400 may be physical connections or may be established wirelessly.

The network 420 may include wired networks, wireless networks, orcombinations thereof. The wireless network may be a cellular telephonenetwork, an 802.11, 802.16, 802.20, or WiMax network. Further, thenetwork 420 may be a public network, such as the Internet, a privatenetwork, such as an intranet, or combinations thereof, and may utilize avariety of networking protocols now available or later developedincluding, but not limited to TCP/IP based networking protocols.

Embodiments of the subject matter and the functional operationsdescribed in this specification can be implemented in digital electroniccircuitry, or in computer software, firmware, or hardware, including thestructures disclosed in this specification and their structuralequivalents, or in combinations of one or more of them. Embodiments ofthe subject matter described in this specification can be implemented asone or more computer program products, i.e., one or more modules ofcomputer program instructions encoded on a computer readable medium forexecution by, or to control the operation of, data processing apparatus.While the computer-readable medium is shown to be a single medium, theterm “computer-readable medium” includes a single medium or multiplemedia, such as a centralized or distributed database, and/or associatedcaches and servers that store one or more sets of instructions. The term“computer-readable medium” shall also include any medium that is capableof storing, encoding or carrying a set of instructions for execution bya processor or that cause a computer system to perform any one or moreof the methods or operations disclosed herein. The computer readablemedium can be a machine-readable storage device, a machine-readablestorage substrate, a memory device, or a combination of one or more ofthem. The term “data processing apparatus” encompasses all apparatus,devices, and machines for processing data, including by way of example aprogrammable processor, a computer, or multiple processors or computers.The apparatus can include, in addition to hardware, code that creates anexecution environment for the computer program in question, e.g., codethat constitutes processor firmware, a protocol stack, a databasemanagement system, an operating system, or a combination of one or moreof them.

In a particular non-limiting, exemplary embodiment, thecomputer-readable medium can include a solid-state memory such as amemory card or other package that houses one or more non-volatileread-only memories. Further, the computer-readable medium can be arandom access memory or other volatile re-writable memory. Additionally,the computer-readable medium can include a magneto-optical or opticalmedium, such as a disk or tapes or other storage device to capturecarrier wave signals such as a signal communicated over a transmissionmedium. A digital file attachment to an e-mail or other self-containedinformation archive or set of archives may be considered a distributionmedium that is a tangible storage medium. Accordingly, the disclosure isconsidered to include any one or more of a computer-readable medium or adistribution medium and other equivalents and successor media, in whichdata or instructions may be stored.

In an alternative embodiment, dedicated hardware implementations, suchas application specific integrated circuits, programmable logic arraysand other hardware devices, can be constructed to implement one or moreof the methods described herein. Applications that may include theapparatus and systems of various embodiments can broadly include avariety of electronic and computer systems. One or more embodimentsdescribed herein may implement functions using two or more specificinterconnected hardware modules or devices with related control and datasignals that can be communicated between and through the modules, or asportions of an application-specific integrated circuit. Accordingly, thepresent system encompasses software, firmware, and hardwareimplementations.

In accordance with various embodiments of the present disclosure, themethods described herein may be implemented by software programsexecutable by a computer system. Further, in an exemplary, non-limitedembodiment, implementations can include distributed processing,component/object distributed processing, and parallel processing.Alternatively, virtual computer system processing can be constructed toimplement one or more of the methods or functionality as describedherein.

Although the present specification describes components and functionsthat may be implemented in particular embodiments with reference toparticular standards and protocols, the invention is not limited to suchstandards and protocols. For example, standards for Internet and otherpacket switched network transmission (e.g., TCP/IP, UDP/IP, HTML, HTTP,HTTPS) represent examples of the state of the art. Such standards areperiodically superseded by faster or more efficient equivalents havingessentially the same functions. Accordingly, replacement standards andprotocols having the same or similar functions as those disclosed hereinare considered equivalents thereof.

A computer program (also known as a program, software, softwareapplication, script, or code) can be written in any form of programminglanguage, including compiled or interpreted languages, and it can bedeployed in any form, including as a standalone program or as a module,component, subroutine, or other unit suitable for use in a computingenvironment. A computer program does not necessarily correspond to afile in a file system. A program can be stored in a portion of a filethat holds other programs or data (e.g., one or more scripts stored in amarkup language document), in a single file dedicated to the program inquestion, or in multiple coordinated files (e.g., files that store oneor more modules, sub programs, or portions of code). A computer programcan be deployed to be executed on one computer or on multiple computersthat are located at one site or distributed across multiple sites andinterconnected by a communication network.

The processes and logic flows described in this specification can beperformed by one or more programmable processors executing one or morecomputer programs to perform functions by operating on input data andgenerating output. The processes and logic flows can also be performedby, and apparatus can also be implemented as, special purpose logiccircuitry, e.g., an FPGA (field programmable gate array) or an ASIC(application specific integrated circuit).

Processors suitable for the execution of a computer program include, byway of example, both general and special purpose microprocessors, andanyone or more processors of any kind of digital computer. Generally, aprocessor will receive instructions and data from a read only memory ora random access memory or both. The essential elements of a computer area processor for performing instructions and one or more memory devicesfor storing instructions and data. Generally, a computer will alsoinclude, or be operatively coupled to receive data from or transfer datato, or both, one or more mass storage devices for storing data, e.g.,magnetic, magneto optical disks, or optical disks. However, a computerneed not have such devices. Moreover, a computer can be embedded inanother device, e.g., a mobile telephone, a personal digital assistant(PDA), a mobile audio player, a Global Positioning System (GPS)receiver, to name just a few. Computer readable media suitable forstoring computer program instructions and data include all forms of nonvolatile memory, media and memory devices, including by way of examplesemiconductor memory devices, e.g., EPROM, EEPROM, and flash memorydevices; magnetic disks, e.g., internal hard disks or removable disks;magneto optical disks; and CD ROM and DVD-ROM disks. The processor andthe memory can be supplemented by, or incorporated in, special purposelogic circuitry.

To provide for interaction with a user, embodiments of the subjectmatter described in this specification can be implemented on a devicehaving a display, e.g., a CRT (cathode ray tube) or LCD (liquid crystaldisplay) monitor, for displaying information to the user and a keyboardand a pointing device, e.g., a mouse or a trackball, by which the usercan provide input to the computer. Other kinds of devices can be used toprovide for interaction with a user as well; for example, feedbackprovided to the user can be any form of sensory feedback, e.g., visualfeedback, auditory feedback, or tactile feedback; and input from theuser can be received in any form, including acoustic, speech, or tactileinput.

Embodiments of the subject matter described in this specification can beimplemented in a computing system that includes a back end component,e.g., as a data server, or that includes a middleware component, e.g.,an application server, or that includes a front end component, e.g., aclient computer having a graphical user interface or a Web browserthrough which a user can interact with an implementation of the subjectmatter described in this specification, or any combination of one ormore such back end, middleware, or front end components. The componentsof the system can be interconnected by any form or medium of digitaldata communication, e.g., a communication network. Examples ofcommunication networks include a local area network (“LAN”) and a widearea network (“WAN”), e.g., the Internet.

The computing system can include clients and servers. A client andserver are generally remote from each other and typically interactthrough a communication network. The relationship of client and serverarises by virtue of computer programs running on the respectivecomputers and having a client-server relationship to each other.

The illustrations of the embodiments described herein are intended toprovide a general understanding of the structure of the variousembodiments. The illustrations are not intended to serve as a completedescription of all of the elements and features of apparatus and systemsthat utilize the structures or methods described herein. Many otherembodiments may be apparent to those of skill in the art upon reviewingthe disclosure. Other embodiments may be utilized and derived from thedisclosure, such that structural and logical substitutions and changesmay be made without departing from the scope of the disclosure.Additionally, the illustrations are merely representational and may notbe drawn to scale. Certain proportions within the illustrations may beexaggerated, while other proportions may be minimized. Accordingly, thedisclosure and the figures are to be regarded as illustrative ratherthan restrictive.

While this specification contains many specifics, these should not beconstrued as limitations on the scope of the invention or of what may beclaimed, but rather as descriptions of features specific to particularembodiments of the invention. Certain features that are described inthis specification in the context of separate embodiments can also beimplemented in combination in a single embodiment. Conversely, variousfeatures that are described in the context of a single embodiment canalso be implemented in multiple embodiments separately or in anysuitable sub-combination. Moreover, although features may be describedabove as acting in certain combinations and even initially claimed assuch, one or more features from a claimed combination can in some casesbe excised from the combination, and the claimed combination may bedirected to a sub-combination or variation of a sub-combination.

Similarly, while operations are depicted in the drawings and describedherein in a particular order, this should not be understood as requiringthat such operations be performed in the particular order shown or insequential order, or that all illustrated operations be performed, toachieve desirable results. In certain circumstances, multitasking andparallel processing may be advantageous. Moreover, the separation ofvarious system components in the embodiments described above should notbe understood as requiring such separation in all embodiments, and itshould be understood that the described program components and systemscan generally be integrated together in a single software product orpackaged into multiple software products.

One or more embodiments of the disclosure may be referred to herein,individually and/or collectively, by the term “invention” merely forconvenience and without intending to voluntarily limit the scope of thisapplication to any particular invention or inventive concept. Moreover,although specific embodiments have been illustrated and describedherein, it should be appreciated that any subsequent arrangementdesigned to achieve the same or similar purpose may be substituted forthe specific embodiments shown. This disclosure is intended to cover anyand all subsequent adaptations or variations of various embodiments.Combinations of the above embodiments, and other embodiments notspecifically described herein, will be apparent to those of skill in theart upon reviewing the description.

The Abstract of the Disclosure is provided to comply with 37 C.F.R.§1.72(b) and is submitted with the understanding that it will not beused to interpret or limit the scope or meaning of the claims. Inaddition, in the foregoing Detailed Description, various features may begrouped together or described in a single embodiment for the purpose ofstreamlining the disclosure. This disclosure is not to be interpreted asreflecting an intention that the claimed embodiments require morefeatures than are expressly recited in each claim. Rather, as thefollowing claims reflect, inventive subject matter may be directed toless than all of the features of any of the disclosed embodiments. Thus,the following claims are incorporated into the Detailed Description,with each claim standing on its own as defining separately claimedsubject matter.

It is therefore intended that the foregoing detailed description beregarded as illustrative rather than limiting, and that it be understoodthat it is the following claims, including all equivalents, that areintended to define the spirit and scope of this invention.

What is claimed is:
 1. A computer-implemented method for minimizing riskand/or transactional fees associated with a portfolio of bilateralpositions without substantially altering a risk profile thereof, themethod comprising: receiving, by a processor, first criteria from afirst market participant, the first criteria defining conditionsaccording to which one or a plurality of groups of non-identicalpositions within a first portfolio associated with the first marketparticipant is regarded as being offsettable; receiving, by theprocessor, second criteria from a second market participant, the secondcriteria defining conditions according to which one or a plurality ofgroups of non-identical positions within a second portfolio associatedwith the second market participant is regarded as being offsettable,wherein at least one position within the second portfolio represents acounter position to at least one position within the first portfolio;and resolving, by the processor, one or a plurality of nettable and/orconsolidatable groups of non-identical positions within the firstportfolio and/or within the second portfolio, wherein the one or theplurality of nettable and/or consolidatable groups are deemedoffsettable according to each of the first criteria and the secondcriteria, such that a margin requirement and/or a transactional feeassociated with the portfolio of bilateral positions is reduced.
 2. Thecomputer-implemented method of claim 1 wherein at least one nettableand/or consolidatable group of non-identical positions is resolvedwithin the first portfolio, wherein at least one nettable and/orconsolidatable group of non-identical positions is resolved within thesecond portfolio, and wherein the at least one nettable and/orconsolidatable group resolved in the first portfolio comprises aposition that is counter to a position in the at least one nettableand/or consolidatable group resolved in the second portfolio.
 3. Thecomputer-implemented method of claim 1 wherein the first criteria andthe second criteria are different.
 4. The computer-implemented method ofclaim 1 wherein the resolving comprises netting, consolidating, or acombination of both.
 5. The computer-implemented method of claim 1wherein at least one position in the first portfolio and/or the secondportfolio comprises a position in an interest rate swap contract.
 6. Thecomputer-implemented method of claim 1 wherein the first criteria defineconditions according to which a plurality of groups of non-identicalpositions within the first portfolio are regarded as being offsettable,and wherein the second criteria define conditions according to which aplurality of groups of non-identical positions within the secondportfolio are regarded as being offsettable.
 7. The computer-implementedmethod of claim 1 wherein the first market participant and the secondmarket participant maintain anonymity.
 8. The computer-implementedmethod of claim 1 wherein the resolving is performed through an Exchangeacting as a central counterparty.
 9. The computer-implemented method ofclaim 1 wherein a plurality of nettable and/or consolidatable groups ofnon-identical positions within the first portfolio and/or within thesecond portfolio are resolved.
 10. The computer-implemented method ofclaim 1 wherein the resolving is simulated.
 11. The computer-implementedmethod of claim 1 wherein each of the non-identical positions in thefirst portfolio and the second portfolio is characterized by a maturity,a coupon, and a measure of risk.
 12. The computer-implemented method ofclaim 11, wherein the conditions defined by the first criteria and theconditions defined by the second criteria are each independentlyselected from the group consisting of a maximum difference between thematurity of at least two non-identical positions within a commonportfolio, a minimum difference between the maturity of at least twonon-identical positions within a common portfolio, a maximum differencebetween the coupons of at least two non-identical positions within acommon portfolio, a minimum difference between the coupons of at leasttwo non-identical positions within a common portfolio, a maximumdifference between the measure of risk of at least two non-identicalpositions within a common portfolio, a minimum difference between themeasure of risk of at least two non-identical positions within a commonportfolio, and combinations thereof.
 13. The computer-implemented methodof claim 1 further comprising receiving, by the processor, one or aplurality of additional sets of criteria from, respectively, one or aplurality of additional market participants, each of the one or theplurality of additional sets of criteria defining conditions accordingto which one or a plurality of groups of non-identical positions withina portfolio associated, respectively, with the one or the plurality ofadditional market participants is regarded as being offsettable.
 14. Thecomputer-implemented method of claim 1 wherein a plurality of nettableand/or consolidatable groups of non-identical positions are resolvedwithin the first portfolio, and wherein a plurality of nettable and/orconsolidatable groups of non-identical positions are resolved within thesecond portfolio.
 15. The computer-implemented method of claim 1 whereinthe first criteria and/or the second criteria independently comprises anexclusion of at least one position within, respectively, the firstportfolio and/or the second portfolio from being eligible foroffsetting.
 16. A system for minimizing risk and/or transactional feesassociated with a portfolio of bilateral positions without substantiallyaltering a risk profile thereof, the system comprising: a processor; amemory coupled with the processor; first logic stored in the memory andexecutable by the processor to cause the processor to receive firstcriteria from a first market participant, the first criteria definingconditions according to which one or a plurality of groups ofnon-identical positions within a first portfolio associated with thefirst market participant is regarded as being offsettable; second logicstored in the memory and executable by the processor to cause theprocessor to receive second criteria from a second market participant,the second criteria defining conditions according to which one or aplurality of groups of non-identical positions within a second portfolioassociated with the second market participant is regarded as beingoffsettable, wherein at least one position within the second portfoliorepresents a counter position to at least one position within the firstportfolio; and third logic stored in the memory and executable by theprocessor to cause the processor to resolve one or a plurality ofnettable and/or consolidatable groups of non-identical positions withinthe first portfolio and/or within the second portfolio, wherein the oneor the plurality of nettable and/or consolidatable groups are deemedoffsettable according to each of the first criteria and the secondcriteria, such that a margin requirement and/or a transactional feeassociated with the portfolio of bilateral positions is reduced.
 17. Thesystem of claim 16 further comprising fourth logic stored in the memoryand executable by the processor to cause the processor to resolve atleast one nettable and/or consolidatable group of non-identicalpositions within the first portfolio and to resolve at least onenettable and/or consolidatable group of non-identical positions withinthe second portfolio, wherein the at least one nettable and/orconsolidatable group resolved in the first portfolio comprises aposition that is counter to a position in the at least one nettableand/or consolidatable group resolved in the second portfolio.
 18. Thesystem of claim 16 wherein at least one position in the first portfolioand/or the second portfolio comprises a position in an interest rateswap contract.
 19. The system of claim 18 wherein each of thenon-identical positions in the first portfolio and the second portfoliois characterized by a maturity, a coupon, and a measure of risk.
 20. Thesystem of claim 19, wherein the conditions defined by the first criteriaand the conditions defined by the second criteria are each independentlyselected from the group consisting of a maximum difference between thematurity of at least two non-identical positions within a commonportfolio, a minimum difference between the maturity of at least twonon-identical positions within a common portfolio, a maximum differencebetween the coupons of at least two non-identical positions within acommon portfolio, a minimum difference between the coupons of at leasttwo non-identical positions within a common portfolio, a maximumdifference between the measure of risk of at least two non-identicalpositions within a common portfolio, a minimum difference between themeasure of risk of at least two non-identical positions within a commonportfolio, and combinations thereof.
 21. The system of claim 16 furthercomprising fourth logic stored in the memory and executable by theprocessor to cause the processor to receive one or a plurality ofadditional sets of criteria from, respectively, one or a plurality ofadditional market participants, each of the one or the plurality ofadditional sets of criteria defining conditions according to which oneor a plurality of groups of non-identical positions within a portfolioassociated, respectively, with the one or the plurality of additionalmarket participants is regarded as being offsettable.
 22. A system forminimizing risk and/or transactional fees associated with a portfolio ofbilateral positions without substantially altering a risk profilethereof, the system comprising: means for receiving first criteria froma first market participant, the first criteria defining conditionsaccording to which one or a plurality of groups of non-identicalpositions within a first portfolio associated with the first marketparticipant is regarded as being offsettable; means for receiving secondcriteria from a second market participant, the second criteria definingconditions according to which one or a plurality of groups ofnon-identical positions within a second portfolio associated with thesecond market participant is regarded as being offsettable, wherein atleast one position within the second portfolio represents a counterposition to at least one position within the first portfolio; and meansfor resolving one or a plurality of nettable and/or consolidatablegroups of non-identical positions within the first portfolio and/orwithin the second portfolio, wherein the one or the plurality ofnettable and/or consolidatable groups are deemed offsettable accordingto each of the first criteria and the second criteria, such that amargin requirement and/or a transactional fee associated with theportfolio of bilateral positions is reduced.